Venture Capital investment in start-ups hits new peak

Australian venture capital (VC) invested in Australia hit a record US$630 million in the 2017/18 financial year, according to Venture Pulse Q2 2018, the quarterly global VC trends report published by KPMG. Over the quarter, US$209.09 million of startup investment was recorded in Australia. The number of deals, at 27, was down up the last quarter (31), when investment totalled US$169.8 million.

Amanda Price, Head of KPMG Australia High Growth Ventures said, “Venture financing continues to rise in Australia, keeping pace with worldwide trends. It is encouraging to see Australian startups gaining access to the capital they need to develop into global companies.”

“However, as the VC focus contines to shift towards larger raises for later stage startups, it raises questions as to where the funding for early stage ventures will come from. This is a real concern as we are not seeing an increase in angel investors or seed investment. If we want to Australia to have a successful and growing startup eco-system we need capital at every stage of the pipeline,” Ms Price added.

Global trends

Ovreall, global venture capital (VC) investment hit a new record high in Q2’18, reaching US$69.8 billion across 3,108 deals in Q2, according to Venture Pulse Q2, 2018, a quarterly report on global VC trends published by KPMG Enterprise.

While VC deal volume continued to decline, the median deal size globally remained well above last year’s totals across all deal stages, reaching $1.4 million (2018 YTD) for angel and seed stage rounds, $7 million (2018 YTD) for early stage rounds, and $13.5 million (2018 YTD) for late-stage rounds.

Other Q2 2018 highlights include:

  • Global VC investment rose from $58 billion in Q1’18 to $69.8 billion in Q2’18, a solid increase buoyed by five $1 billion+ megadeals.
  • Corporate participation in global VC deals continued to rise, reaching a record 22 percent in Q2’18 of overall volume, with associated deal value hitting nearly $46 billion.
  • Global first-time venture financing volume remained subdued during Q2’18 and is on pace for its lowest annual total in a decade.
  • Asia set a new record for VC investment in Q2’18, with $35.9 billion raised across 466 deals. Chinese companies represented eight of the top 10 deals globally, led by a massive $14 billion deal by Ant Financial.
  • The US saw 9 deals valued at $250+ million during the quarter, led by massive deals by Faraday Future and Lyft. California continued to dominate as the US VC market leader, accounting for nine of the top 10 deals in the US.

Corporate VC activity on the rise

Globally, corporate VC activity reached heights in Q2’18. Corporates participated in over 22 percent of all deals and accounted for over $46 billion in associated deal value during the quarter. This represents a continuing trend seen throughout the world over the past year and in particular in Asia, where corporate participation surpassed 31 percent in Q2.

Strong outlook expected for remainder of 2018

Venture capital activity globally is expected to remain strong heading into Q3’18. The impact of tax reforms in the US, a significant amount of dry powder, and the continued flow of funding into the VC world are expected to keep the VC market strong. Autonomous driving, healthtech and biotech are expected to be big winners over the next few quarters, in addition to blockchain.

Agtech investment continues to soar

2017 was a blockbuster year for VC investment in Agtech, with over $1.7 billion total invested on the power of a series of mega-deals late in the year, including Ginkgo Bioworks, Indigo Agriand Farmers Business Network. In 2018, we’ve seen this momentum continue with more than $600 million invested across 105 deals in the first 5 months of the year.

Ben van Delden, Partner, Head of AgTech & Markets, KPMG Australia, said, “As governments and NGOs strive to ensure they have sufficient food and water for their people, and meet their environmental stewardship obligations, we expect to see interest in Agtech grow significantly and more VC activity.

“The rise of AgTech activity and accelerators in Australia is creating more local AgTech investment opportunity, which we expect to lead to more deal activity in the second half of 2018 and beyond.”

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